Legal Alert

White House Pauses Federal Funding Under Inflation Reduction Act and Infrastructure Investment and Jobs Acts

by Michael A. Charlebois, Andy Keyes, David L. Evans, and Ben Vernon
January 30, 2025

Overview

On January 20, 2025, the White House issued an Executive Order titled Unleashing American Energy.1 Citing the detrimental effect of “ideologically motivated regulations,” the Order broadly establishes a new executive energy policy2, revokes and rescinds various prior executive orders deemed noncompliant with the new policy, and requires immediate review of all agency action to ensure adherence to the new policy.3

The Order enacts an immediate pause and review of disbursements of funds appropriated through the Inflation Reduction Act of 20224 and the Infrastructure Investment and Jobs Act5 to determine their compatibility with the new policy.6 These reviews are subject to approval by the OMB and the Assistant to the President for Economic Policy of the NEC. The Order requires the head of each executive agency to submit a plan to OMB and NEC within 30 days of the Order to implement changes to agency procedure in accordance with the new policy declaration or to certify that no change is required. Within 90 days, the agency heads must submit a report to the NEC and OMB detailing findings of a review of any disbursements of funds appropriated under the IRA and IIJA, including recommendations to enhance such disbursements’ alignment with the Order. No disbursements are authorized to be released until OMB grants approval.

A Memorandum to the Heads of Departments and Agencies from the OMB on January 21, 2025, (the January 21 OMB Memo) clarifies that this pause applies only to funds supporting programs, projects, or activities that may be implicated by the new policy (“Terminating the Green New Deal”), and agency heads are permitted to disburse funds as they deem necessary after consulting with the OMB.7

The OMB Memo clarifies that the Order’s pause on the disbursement of funds under the IRA and IIJA relate to appropriations for objectives that contravene the policies established in Section 2 of the order (which objectives the Order impliedly defines as the Green New Deal), which policies include, among other things: (1) encouraging energy exploration and production on Federal lands and waters; (2) producing and processing non-fuel minerals; (3) ensuring abundant supply of reliable energy; and (4) eliminating the “electric vehicle mandate.” However, it will be up to the OMB to determine if existing IRA and IIJA funding programs support the “Green New Deal” and, accordingly, contravene the policies set forth in the Order.

A Memorandum For Heads of Departments and Agencies (M-25-13) from the OMB on January 27, 2025, (the January 27 OMB Memo) requires that all federal agencies “temporarily pause all activities related to obligation or disbursement of all federal financial assistance, and other relevant agency activities that may be implicated by [the Order and other recent Presidential executive orders] …”, effective January 28, 2025, at 5:00 pm.8 This pause would be pending analysis by federal agencies of all federal financial assistance programs to identify programs, projects and activities that may be implicated by the Order or other recent presidential executive orders, and review by OMB of all such federal funding programs.

On January 28, 2025, National Council of Nonprofits, American Public Health Association, Main Street Alliance, and SAGE filed a complaint in the United States District Court for the District of Columbia against the OMB and Matthew Vaeth, in his official capacity as Acting Director of the OMB (the Compliant).9 The Complaint alleges that the January 27 OMB Memo’s order to pause funding it (i) violates the Administrative Procedure Act because it is arbitrary and capricious, (ii) violates the Administrative Procedures Act because it is in excess of the OMB’s statutory authority, and (iii) violates the First Amendment to the United States Constitution because its conditions to the receipt of federal funding burden political speech and association rights and discriminate based on viewpoint. On January 28, 2025, Judge Loren AliKhan granted the Plaintiffs an administrative stay lasting until Monday, February 3, and applying only to the implementation of the January 27 OMB Memo relating to existing programs.

On January 29, 2025, the OMB rescinded the January 27 OMB Memo.

The ultimate outcome of the Order and its effect on funding under the IRA and IIJA will remain uncertain pending any additional directives from the Trump Administration, and existing or future litigation challenging the Order, as well as review by the OMB and NEC of individual funding programs. However, the January 21 OMB Memo suggests that agency consultation with OMB will be sufficient to permit disbursements not relating to the “Green New Deal” to continue10, albeit potentially delayed due to reviews mandated by the January 21 OMB Memo.



1. Unleashing American Energy, Jan. 20, 2025, click here to view.

2. The Order broadly lays out nine-points of energy policy focused on increasing U.S. energy and mineral production and expediting the regulatory process for the approval of domestic energy projects and exports. The Order proclaims that it will be the policy of the United States to: (a) encourage energy exploration on public lands and waters, (b) increase non-fuel mineral production, (c) ensure energy availability across the United States, (d) ground energy-related regulations in clearly-applicable law, (e) reduce consumer vehicle and emissions regulations, (f) increase access to certain consumer goods alternatives, (g) compare the national and international effects of potential regulation, prioritizing national wellbeing, (h) provide for increased public comment and peer-reviewed scientific analysis of agency actions, and (i) prohibit the application of federal funds contrary to the new policy declaration.

3. Id. at Sec. 1.

4. Inflation Reduction Act of 2022, P.L. 117-169.

5. Infrastructure Investment and Jobs Act, P.L. 117-58

6. The IIJA authorized over $1.2 trillion for transportation and infrastructure spending with $550 billion going toward new investments and programs, including energy and power infrastructure, access to broadband internet, and water infrastructure. Bipartisan Infrastructure Law (BIL)/ Infrastructure Investment and Jobs Act (IIJA), (Feb. 16, 2023). Click here to view. The IRA authorized certain tax credits allowing direct payments to be made in lieu of a reduction in tax liability, (often referred to as “direct pay”) alongside providing transferability to entities with greater tax liability. Inflation Reduction Act Summary, click here to view.

7. Memorandum to the Heads of Departments and Agencies, Jan. 21, 2025, M-25-11, click here to view.

8. Memorandum to the Heads of Departments and Agencies, Jan. 27, 2025, M-25-13.

9. Complaint, National Council of Nonprofits et al. v. Office of Management and Budget et al., Case 1:25-cv-00239 (D.D.C. January 28, 2025).

10. See Memorandum, Paragraph 2.

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